Multilateral Tariff Cooperation During the Formation of Regional Free Trade Areas

Kyle Bagwell and Robert Staiger

International Trade from University Library of Munich, Germany

Abstract: We explore the impact of the formation of regional free trade agreements on the ability of countries to maintain low cooperative multilateral tariffs. We assume that countries can not make binding international commitments, but are instead limited to self-enforcing arrangements. Specifically, we model cooperation in multilateral trade policy as involving a constant balance between, on the one hand, the gains from deviating unilaterally from an agreed-upon trade policy, and on the other, the discounted expected future benefits of maintaining multilateral cooperation, with the understanding that the latter would be forfeited in the trade war which followed a unilateral defection in pursuit of the former. In this context, we explore the way in which the formation of regional free trade agreements upsets the balance between current and future conditions, and trace through the dynamic ramifications of these effects for multilateral cooperation. Our results suggest that the emergence of regional free trade areas will be accompanied by a temporary retreat from liberal multilateral trade policies. Eventually, however, as the full impact of the emerging free trade agreement on multilateral trade patterns is felt, the initial balance between current and expected future conditions tends to reemerge, and liberal multilateral trade policies can be restored.

JEL-codes: F1 F2 (search for similar items in EconPapers)
Date: 1994-10-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/9410/9410001.pdf (application/pdf)
https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/9410/9410001.ps.gz (application/postscript)

Related works:
Working Paper: Multilateral Tariff Cooperation During the Formation of Regional Free Trade Areas (1994)
Working Paper: Multilateral Tarriff Cooperation During the Formation of Regional Free Trade Areas (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpit:9410001

Access Statistics for this paper

More papers in International Trade from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).